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EUR Rallies on Spanish Inflation Beat

FOREX
  • USD/JPY slipped sharply through mid-Asia hours on the back of a publication from the Japan Productivity Centre - notably headed by Yuri Okina, a leading candidate for a senior position at the BoJ in the upcoming reshuffle - who wrote that the BoJ and government should commit to longer-term policy objectives around inflation. The pair shed around 80 pips on the report's release, bottoming out at 129.21 before bouncing into the European open.
  • The EUR is the strongest currency across G10, bouncing on the release of a much higher-than-expected Spanish CPI print. Y/Y CPI hit 5.8%, a 1 percentage point beat on expectations, prompting EUR/USD to trade north of the 1.09 handle at the NY crossover.
  • The inflation release will raise concerns about other regional CPIs this week, with Germany, France, Netherlands and the Eurozone-wide figure on the docket ahead of Thursday's ECB decision. 50bps remains well-priced from the ECB, with the peak rate the point of focus for the press conference. Rates markets briefly priced a peak of 3.5% following the Spanish inflation release.
  • Datapoints are few and far between Monday, with focus resting on the busy second half of the week, from the Fed, ECB and BoE decisions as well as a frantic earnings calendar and the US jobs report release on Friday. ECB's Villeroy is scheduled to speak, but is unlikely to address policy directly.
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